Israel’s new parliamentary bill to ban all aspects of the Binary Options brokerage business from the country – including when it comes to foreign clients – seems to be well on its way to becoming law.
The bill, known now as Israel’s Binary Options Law, passed the first of three required readings today in Israel’s parliament, the Knesset, receiving a 31-0 vote after a brief discussion on the floor.
The only comments made by the few Knesset members who bothered to speak on the matter were that the legislation seemed excellent, and that the country should look at extending the legislation to cover other areas of speculative investment where retail clients might be taken advantage of.
Next steps?
Formally, the bill now heads back to the Knesset’s Finance Committee. The Finance Committee members can decide either to amend parts of the bill, or to just reintroduce it as is for the second reading. Given the 31-0 vote, and the apparent desire of both Israel Securities Authority Chairman Shmuel Hauser as well as members of Israel’s Finance Ministry to move the legislation forward as fast as possible, we would expect a speedy move to second reading, possibly within the next week.
Israel’s parliament requires three readings of a bill before it can become law, with a final Knesset vote usually taking place immediately after the third reading.
Assuming that the bill gets through the next two readings and a Knesset vote before the plenary’s summer break which begins July 31, it formally becomes law three months after passing. Meaning, that at the earliest the Israel Binary Options ban won’t formally come into effect until the end of September / beginning of October.
The legislation considers the operation of a Binary Options brokerage in Israel – whether targeting Israeli or foreign clients – to be a criminal offense punishable by up to two years in prison. It will also be considered a contravention of Israel’s anti-money laundering (AML) laws, which can carry further prison time and monetary penalties.
The new legislation covers the operation of any part of a Binary Options brokerage: provision of software services required to run a brokerage, provision of payment services for the purposes of binary options trading, the marketing of binary options services, and of course providing any sort of customer service or contact with customers.
The bill was instigated mainly by the regulator ISA and its Chairman Shmuel Hauser. Mr. Hauser has come under a lot of pressure to “deal with” the many Binary Options scams emanating from Israel. However he has stated that the current law only gave him the authority to stop Binary Options brokers from taking Israel-based clients, not marketing abroad or even taking clients from abroad.
There have been a number of outright Binary Options fraud cases which Israeli authorities have been able to pursue involving clients from abroad. However fraud is a lot harder to catch and prove than just a pure ban on marketing to or taking clients.
The new legislation will formally ban Israel-based Binary Options brokers from taking foreign clients, or marketing or providing other Binary Options related services to foreign clients.
In the build-up to the law’s passing, quite a number of Israel-based Binary Options brokers have either shut down, the most visible being Banc de Binary, or moved their operations physically out of the country. Popular landing spots for these companies have included Cyprus, for those handful of brokers which are CySEC regulated, as well as Bulgaria, Romania, Ukraine and Latvia.
The ISA has also taken steps to tighten its grip on the Forex brokers in the country. The ISA introduced last year a required Forex Dealer license for brokers which take Israeli clients, and has handed out six of the licenses to date.
The full text of the bill which was sent to the Knesset for today’s first reading can be seen on the Knesset website here (pdf, in Hebrew only).